TOKYO – Japan’s economy is showing remarkable strength, with new data revealing much faster-than-expected growth in the second quarter. This powerful economic performance comes as a new poll indicates consumer inflation likely slowed in July, painting a positive picture of a resilient economy with moderating price pressures.
The impressive economic expansion was driven by a surge in exports, according to data released Friday. This demonstrates the continued strength of Japan’s industrial and trade sectors, positioning the world’s fourth-largest economy for continued success.
Adding to the good news, a Reuters poll of 20 economists suggests that the core consumer price index (CPI) likely rose 3.0% in July, a welcome slowdown from the 3.3% seen in June. This easing is primarily attributed to lower energy prices, offering some relief to households and businesses.
While inflation remains above the Bank of Japan’s 2% target, analysts see this as a sign of underlying economic health. The sustained price levels reflect strong demand and the ability of Japanese companies to successfully manage rising raw material and labor costs.
“A rapid decline (in inflation) is not expected,” noted Junya Takemoto, senior economist at Sumitomo Mitsui Banking Corporation, indicating that the economic strength is sustainable.
The Bank of Japan (BOJ) is navigating this positive landscape with a cautious and steady hand. Governor Kazuo Ueda has signaled a readiness to normalize policy but has emphasized a gradual approach to ensure that growth is not hindered. This balanced strategy is aimed at sustaining the economic momentum while keeping inflation in check, a sentiment echoed by international observers like U.S. Treasury Secretary Scott Bessent, who noted the likelihood of the BOJ acting to manage the strong economy.
